How to Buy a Used Car in an Age of Widespread Recalls

Earl Stewart, a Toyota dealer, at one of his lots in West Palm Beach, Fla. He refuses to sell used cars with open recalls, but he does not turn away buyers trading in cars whose airbags have not yet been fixed, like the ones at this lot.

Scott McIntyre for The New York Times

January 27, 2017

Your Money

By RON LIEBER

For people in the market for a used car, the “certified pre-owned” designation has long been the gold standard, an indication that a qualified mechanic has vouched for the car and that a buyer can expect a vehicle that is — hopefully — almost as good as new.

But the Takata airbag recall, which is the biggest in history, has upended all of that. Now the certified designation — known in the auto trade as C.P.O. — will no longer necessarily have the same meaning. For one thing, last month the Federal Trade Commission made it easier for cars to be billed as “certified,” even if they were under recall and hadn’t been fixed yet.

And just as significantly, Ford — with the F.T.C. settlement for cover — told its dealers this week that they could sell recalled vehicles and certify them too, so long as they did not advertise them as “safe” and required buyers to sign forms acknowledging that they were aware of the problem.

Against this backdrop, one dealer in Florida has refused to sell recalled vehicles that he cannot get fixed, letting 100 or so pile up on a lot miles from his main showroom. He even sued a rival who he believes is selling recalled cars without disclosing that they have not been fixed yet.

How did the used-car market get so confusing all of a sudden? For starters, the Takata airbag recall is unprecedented in its scope, with over 60 million airbags affected, but also in its complexity. Dealers can’t simply fix everything at once, because there are not enough replacement parts. As a result, the airbags most likely to cause harm are first in line for repair, and the lines for existing recalls and others to come may extend for at least a few more years.

Given that situation, the Federal Trade Commission told General Motors and two dealers in December that it was just fine to advertise used vehicles as certified even if their airbags were under recall and had not been fixed. Just disclose it, the agency said (in a complaint that has sent jaws dropping throughout the auto industry).

Until early this week, every major car company had said that they forbade their dealers from selling certified used vehicles with any open recalls, including ones for Takata airbags.

On Monday, however, Ford broke ranks, issuing an update to dealers on its “enhanced” recall process and giving them permission to certify used vehicles that had open recalls after all. There are conditions for the dealers, including these: They must note the recall in two different places and have buyers initial a form. When parts arrive, they have to contact buyers to schedule a replacement. And no advertisements may make claims about “safety” or “safety inspections.”

So does Ford believe there is no competitive advantage to be gained from fixing all recalled cars before selling them? “It’s very difficult to answer that,” Sara Tatchio, a Ford spokeswoman, said. “We absolutely put safety first and fix everything we can.”

All the chaos, conflict and changing policies leave consumers in a frustrating position, trying to sort out who’s still selling cars that federal regulators have ordered to be fixed and just how much any seller is disclosing. While federal law prevents dealers from selling new cars with an open recall, no federal law forbids them from selling used ones that way, even if some state consumer protection laws might help an injured owner’s case.

In the complex used-car ecosystem of trade-ins and with wholesalers and sellers of various sorts, this has created a number of challenges and a wide range of responses, including some prominent companies that have changed their policies 180 degrees.

Whatever policies they set, automakers have only so much control, given that people who work at dealerships occasionally go rogue. Moreover, dealers sometimes certify a car as clean and put it up for sale — and then it’s recalled right after that. If the dealer does not catch it and pull the car out of the sales inventory, it is violating the automaker’s rules (and could attract the attention of the F.T.C.).

Buyers who wonder how safe it is to drive with a recalled Takata airbag and check the National Highway Traffic Safety Administrationwebsite will learn the following: “The vast majority of Takata airbags will perform as expected.” Oh, but: “Lives have been lost due to this defect.”

Reaction in the industry to Ford’s move was somewhat muted. Audi, BMW, General Motors, Honda, Kia, Mazda and Subaru said they had no plans to follow Ford’s move.

A faulty Takata airbag at Mr. Stewart’s operation in West Palm Beach on Wednesday.

Scott McIntyre for The New York Times

Toyota’s response was a bit more squishy. “We are not going to speculate on what impact the F.T.C. ruling may or may not have on Toyota’s current policy,” Aaron Fowles, a Toyota spokesman, said via email. “But there have been no changes to date.”

The used-car chain CarMax has taken a similar approach to Ford’s. While it too had a recent run-in with the F.T.C. over disclosure issues, the company says that it is transparent as possible, from its online listings to its in-person interactions.

But why sell cars with open recalls at all, thus putting the onus on consumers to sort out the repair? In a statement on its website, CarMax, which cannot repair recalled vehicles itself, states that “customers are in the best position to act on recall information.”

How can that be? Well, CarMax explains that dealers who are authorized to do recall repairs are more likely to repair cars quickly when working with an individual. If CarMax showed up with dozens of cars, those dealers might shun it because it competes with that dealer’s used-car operation.

Does this sound like an extremely useful conspiracy theory designed to dump all the hassle on consumers, who have the least knowledge of how the system works? Would CarMax at least call out said manufacturers by name, to help get to the bottom of this? No, it would not.

“Some manufacturers have provided guidance to their dealers that they should remediate recalls for dealer customers first,” a CarMax spokeswoman, Catherine M. Gryp, said in an email message. “Across the country, we have been put in the back of the line for recall repairs.”

AutoNation took a different approach, at least at first. In 2015, its chief executive, Mike Jackson, told Automotive News that the recall situation was “a dysfunctional nightmare that the industry should be ashamed of.” The company pledged to sell no cars with open recalls, period.

By last year, it was costing the company dearly, to the tune of 6 cents per share of its earnings in the third quarter. In November, it gave up and began selling some cars with open recalls (and full disclosures). The lack of Takata airbag replacements, the F.T.C.’s decision and other anticipated regulatory rollbacks proved to be too much.

“We are proud of the efforts we made, but sometimes the system beats you down,” Marc Cannon, the company’s chief marketing officer, said.

Sounds kind of like what it feels like to be a consumer in the middle of all this. If you’re about to start shopping for a used car, begin at safercar.gov. There, you can look up cars — even the vehicle identification number of a specific car you’re considering — to see what recalls are in effect. A report from Carfax can help you figure out whether a recalled car has been fixed.

But don’t stop there. Ask the dealer about any open recalls, as well as any proof they might have that they have gotten the recall fixed. Trust, but verify. (Actually? Don’t trust too much, and verify twice.)

Worried about a car that you already have? You should be, both about future Takata recalls and others that we don’t know about yet. Rosemary Shahan of the Consumers for Auto Reliability and Safety suggests registering your vehicle both with your car’s manufacturer and the National Highway Traffic Safety Administration so that you get a notice if your airbag or anything else comes up for recall. Run the vehicle identification number through some checks yourself from time to time too, just to make sure you’re not missing anything.

You might also hope that more dealers act out in the same way as Earl Stewart of Lake Park, Fla. He refuses to sell used cars with open recalls, but he doesn’t want to turn away people who are trading in cars with recalled Takata airbags that they have not been able to get fixed yet. This trade-in policy isn’t just good customer service; if he can’t take their trade, they might not buy another vehicle from him at the same time that they turn their old one in.

As a result, however, he has 100 or so cars sitting in a lot waiting for repair. And when he sent secret shoppers into competing dealers to see how much disclosure they were doing about recalled cars they were selling, he was outraged at what he found. “Maybe this is unique to South Florida, but they are all extremely devious and proactively trying to sell recalled cars by saying there is no recall,” Mr. Stewart said.

So he filed a lawsuit to try to swing others over to his way of doing things. “I don’t want the money — I just want to stop the practice,” he said. “We’re going to keep filing suits until they throw the towel in.”